Are MBA Application Fees A Ripoff?

MBA applicants who plan to try their chances at a half dozen of the best business schools this year could easily spend more than $1,200 in application fees–more often than not, for the pleasure of getting a rejection notice.

At least six business schools collected more than $1 million last year in application fees to their full-time MBA programs. But no school scooped up more than Harvard Business School which booked nearly $2.4 million alone last year in MBA application fees, according to a new analysis by PoetsandQuants.com.

REJECTED MBA APPLICANTS PAID HARVARD $2 MILLION & STANFORD $1.8 MILLION LAST YEAR

With an acceptance rate of only 12%, some 8,197 people in Harvard’s applicant pool forked over more than $2 million only to get rejected by the school.

Harvard’s big fee stash was followed by Stanford, which picked up more than $1.9 million last year and has raised its application fee by an additional $10 this year to $275, the highest application fee for an MBA program in the world. London Business School’s fee is right behind Stanford’s at 175 British pounds, or $272, at current exchange rates. For the privilege of a rejection letter at Stanford, which accepted fewer than 7% of its estimated 7,200 applicants this past year, MBA candidates handed the school nearly $1.8 million in application fees.

The University of Pennsylvania’s Wharton School was next, collecting an estimated $1.6 million, while Columbia Business School racked up more than $1.4 million in full-time MBA application fees.

CHICAGO BOOTH PUT FORTH THE BIGGEST SINGLE INCREASE IN FEES THIS YEAR

The largest single fee increase for a highly ranked MBA program this year has been put through by the University of Chicago’s Booth School which is charging applicants $250 to apply to its MBA program, a 25% increase from the $200 fee last year. Booth’s fee hike will add nearly a quarter of a million dollars in additional revenue this year, putting the school in the $1 million-plus category.

The Poets&Quants’ analysis shows that the fees to apply to an MBA program have become a significant source of revenue for many business schools. In fact, applicants to the top 25 full-time MBA programs in the U.S. this past year paid $17.8 million. How much a school collects varies widely from Harvard’s chart-topping numbers to zero collected by Vanderbilt University’s business school which does not have an application fee. The lowest fee charged by any Top 25 program is at Indiana University’s Kelley School which charges $75 to apply to its full-time MBA program.

Do schools use the sums they collect to offset the costs of processing applications? Or have the fees become something of a profit center? It’s depends on the school. “As cynical as I am about all aspects of admissions and the B-school experience, I don’t think most schools are running app fees as a profit center,” says Sandy Kreisberg, founder of HBSGuru.com and a prominent MBA admissions consultant.

THE COSTS OF RUNNING AN MBA ADMISSIONS OFFICE

“Start with HBS’s staff of about 20, many of them full-timers, throw in lots of necessary travel, road shows, and interviews in distant cities, and do some math. It costs HBS more than $2 million to run that circus. All that said, there may a scale/marginal cost issue, the same staff could probably process 25% more apps without breaking out into a sweat, so as essays go down, and GRE is allowed to sub for the GMAT, and the number of recs goes down, well, total apps and fees may go up, but that is not driving the ‘slimmer-app’ movement.”

Stanford, believes Kreisberg, may be in a different position, in part because the admissions staff does not do applicant interviews. “My guess is, Stanford may have the cheapest fixed costs vs. income of the top schools,” he says. “For one thing, the interview (which does not really count in the Stanford decision, by the way) is out-sourced to under-employed/sucker alums, and is basically free to the adcom.”

Several business schools, including Columbia and Northwestern University’s Kellogg School of Management, also waive fees for certain applicants. Columbia waives its $250 fee for full-time students, active duty military personnel, members of the Peace Corps, Teach for America and Teach for India applicants. Kellogg waives its $250 fee for anyone who has served in the military during the past three years.